With the the demand in steel sector picking up, Karnataka’s seven iron ore mines in Bellary district have been auctioned this month at a premium rate.

The final bid for the iron ore mines in Karnataka was in the range of 59 to 111 per cent of the floor price — which is monthly value of the mineral dispatched from the mine. JSW group — whose firm JSW Steel is the largest steel company in the country — won five iron ore mines in Karnataka. MSPL, a major iron ore mining company, won other two iron ore mines of the state this month.

The first phase of mines auction, which has been going on since December last year, has seen auction of total 16 non-coal mines till now by seven state governments. The eight mines which were auctioned by other state governments — six of them were limestone, one gold and one diamond — did not see such a high bid from the companies. The bids for these mines were in the range 8 per cent to 59 per cent. Odisha’s iron ore mine was auctioned at a bid of 44 per cent of the floor price in March 2016.

The auction of the 16 non-coal mines is estimated to bring a total revenue of Rs 59,447 crore over the next 50 year period for these state governments.

As per the new mining law — Mines and Minerals (Development and Regulation) Amendment Act, 2015 — which came into effect from January 2015, the non-coal mines have to be auctioned by the respective state governments. Under the old mining law, the state governments only had the powers to grant the mining lease to any company as per their discretion.

The auction process takes place in two rounds. Mineral auction rules, which have been formed under the new mining law, clearly state that in the first round, the bidders have to quote the percentage of the monthly value of the mineral dispatched from the mine. The highest percentage quoted then gets marked as the floor price for the second round.

Subsequently, the bidders get ranked on the basis of the descending initial price offer submitted by them. The first 50 per cent of the ranks or the top five bidders, whichever is higher, are termed as qualified bidders for participating in the second round of electronic auction. The second-round auction then follows the simple forward-bidding process, where the bidder quoting the highest percentage is deemed as
the winner.